Posted on 22 Aug 2024
While major pig iron-consuming markets are on holiday, Russian suppliers are racing against time to load shipments before the zero export duty ends on 31 August and before the EU quota for Russian pig iron is exhausted, Kallanish notes. This situation is further complicated by logistical constraints in Russia due to the grain harvest and the war in Ukraine, with Russia prioritising military shipments over commercial cargo in some regions.
The official Russian rouble exchange rate has surged significantly, reaching RUB 91.69 to $1 compared to RUB 90.69 a day earlier, marking a 2% increase over the past few days. Russian exporters could reduce prices by around $5-10/t due to the exchange rate change without incurring losses, a trader opines.
The EU's 1.14 million-tonne quota for Russian pig iron is expected to be filled even earlier than anticipated, with exhaustion likely in September instead of October. As of 21 August, 300,542 tonnes of the quota remain, with 45,085 tonnes awaiting allocation. With just 22% of the quota, or 255,457 tonnes, left, the EU is expected to limit pig iron usage or shift to alternative, more expensive origins, or raw materials, or even semi-finished products. The next quota becomes available from 1 January to 31 December 2025, and amounts to just 700,000 tonnes. From 2026, Russian pig iron will be banned in the EU due to sanctions over the war in Ukraine.
A trading source noted that 90,000 tonnes, equivalent to two vessels, had just arrived in Italy and was being offloaded. Meanwhile, in Novorossiysk port, around three vessels could be loaded before 31 August, though it remains uncertain if these shipments have already been sold or their destinations confirmed.
“The general strategy for EU-based Russian pig iron buyers will likely involve minimising pig iron use in electric arc furnaces, opting instead to increase the use of HBI/DRI and scrap. If they face significant shortages, they may start purchasing from alternative suppliers, such as Brazil, Ukraine, or India. Therefore, pig iron prices might rise in the EU from September when market activity recovers, but maybe not by much,” a trader opines.
Current pig iron prices, around $420-430/t cfr in Italy and $380-390/t cfr in Turkey, are seen as more nominal than transactional. In view of the most recent deals for scrap at $360/t cfr, Turkish pig iron buyers are bidding on the lower side of $380-385/t cfr.
“The Turks seem indifferent to the potential recovery in China since they’ve secured cheap billets from China/ASEAN, along with affordable scrap and HBI, so they can afford to wait for lower pig iron prices [from Russia],” a trader opines.
As a result, Russian pig iron prices were assessed at $370-405/t fob.
In alternative markets, “Brazil is holding firm at $440/t fob, and the US market is slowing down due to outages and potential scrap price drops,” a trader said.
In India, prices range from $435-445/t fob depending on location. Domestic prices in India hover around INR 36,000-37,000/t ex-works, with limited quantities available for export. However, there were reports that Indian material could also be available at $420/t fob.
An Indonesian producer was offering pig iron at $400/t fob, while bids were not more than $390/t fob.
Source:Kallanish
